Comments and forex-analytics from FBS Brokerage Company - page 173
You are missing trading opportunities:
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
Registration
Log in
You agree to website policy and terms of use
If you do not have an account, please register
Credit Suisse: comments on EUR/JPY
The EUR/JPY cross declines on Monday in conditions of an increased risk aversion on the currency markets. However, the pair remains in an upward channel since early June.
According to analysts at Credit Suisse, the single currency may keep weakening after it failed to overcome the strong resistance lying at 101.50 (38.2% Fibonacci retracement of April-May decline). Specialists believe that the current bullish trend may reverse and the pair may slide to 95.59 (June 1 minimum, lowest since Nov. 2000). The nearest support for the pair lies at 99.23 (23.5% Fibonacci retracement).
Chart. Daily EUR/JPY
Have a profitable trading day with FBS!
If you have any questions to our analysts, you're welcome to ask or comments for this article!
EU summit: who knows what tomorrow holds?
This week the currency market is looking ahead of the crucial EU summit that will take place on June 28-29 in Brussels. We have already heard a lot about the questions on top of the agenda: closer fiscal integration within the currency block, a cross-border banking union and the issue of joint EU bonds. Will the EU leaders manage to reach any final agreements on these key issues? The general analyst’s sentiment is negative: there is lack of confidence and consensus for more aggressive and innovative actions.
At the moment the euro zone’s banking system triggers the biggest concern, that is why the idea of Eurobonds is seen as an emergency exit for the debt-stricken region. However, the German Chancellor Angela Merkel last week resisted the attempts by the leaders of France, Italy and Spain to persuade Germany to agree to joint euro-bloc bonds or bills.
Specialists at RBS expect Germany to remain adamant about rejecting debt mutualization or any sort of common bond. UBS analysts, however, are slightly more optimistic: in their view, Merkel will not give her consent to joint bonds until she gets enough control on how the EU governments conduct the fiscal policy. Analysts add that the German support of the EU members in hot water will weaken as fast as the election in Germany in October 2013 will be nearing.
Specialists at ING expect that the ECB will be bound to take the heat if the summit will bring no solutions: in their view, expectations for further rate cuts at the 5 July meeting are high. However, it’s obvious that the dovish monetary measures cannot support the region’s economy forever. According to analysts at Standard Chartered, a full breakup of the euro zone is not a myth and may happen if the political will for the union is lost. Never the less, they believe that it can be avoided if the currency block quickly moves towards a tighter integration.
It seems the investors can’t put up with the never-ending uncertainty in Europe any longer. As a result, the common currency is likely to weaken further if the EU summit will not make strong progress on core questions.
Image: AFP
June 26-29: main economic events
Tuesday, June 26
Euro area: GfK German consumer climate in June is likely to remain unchanged at 5.7. Italy will offer inflation-linked securities maturing in 2016 and 2026 and 3 billion euro ($3.8 billion) of zero-coupon bonds. Spain will sell 3- and 6-month bills.
Britain: Public sector net borrowing in May is forecasted to rise to 13.1B after a 18.8B decline in April. Later in the day the inflation report hearings will take place.
US: S&P house price index is expected to decline by 2.4% y/y in April (the contraction will be less than in March). CB consumer confidence index in June is to decline to 64.0 vs. 64.9 in May on the back of the deteriorating labor market conditions.
Wednesday, June 27
Germany: Preliminary CPI in June is forecasted to remain unchanged after a 0.2% decline in May.
US: A bunch of positive US data is expected to be released. Core durable goods orders, leading indicator of production, are expected to go up in May by 1.0% m/m compared with a 0.9% decline in April, what will be a positive sign for the economy. Durable goods orders (including transportation items) may increase by 0.5% after a remaining flat in the previous month. Pending home sales in May are to increase by 1.3% m/m vs. a 5.5% drop in April. However, the confidence in the stability of the US housing market is still weak.
Japan: Retail sales in May are likely to increase by 3.1% y/y after a 5.7% growth in April.
Thursday, June 28
Europe: EU Economic Summit will be the first time European leaders meet since the Greek parliamentary elections on June 17. The nation’s new Prime Minister Antonis Samaras who pledged to seek relief from austerity measures imposed on the country while keeping the bailout funds flowing as he has recently undergone surgery to repair a detached retina. Billionaire investor George Soros warns that if the fiscal disagreements aren’t resolved in the next 3 days, the summit could turn out to be a fiasco. In addition, Italy will try to sell 10-year government bonds. The results of the auction will have an extremely strong effect on the market’s sentiment. The yields will be used as a gauge of the market’s confidence of the European policymakers’ resolve to solve the crisis.
Britain: The final British GDP figures will likely confirm that the nation’s economy has fallen into recession declining by 0.3% q/q in the first 3 months of 2012 after losing 0.3% in Q4 2011. Although the markets have already priced in the grim news, the release will once again remind investors about UK economic weakness and make them think that the Bank of England will ultimately have to expand its Asset Purchase Program. Also watch Britain’s current account data, BOE credit conditions survey and Nationwide HPI.
US: The United States also release the final Q1 GDP readings: in May US economic growth in the first quarter was revised down from 2.2% q/q to 1.9%. No further revision is expected this time, so negative surprise would weight on the greenback. Unemployment claims – the indicator closely watched every week – is seen declining slightly from 387K to 387K.
Japan: Here’s a group of important reports which will determine the sentiment during the Asian session. The nation’s core CPI may have risen by only 0.1% y/y in May or even stayed flat compared with the 0.2% y/y increase in April. Tokyo core CPI has been posting negative readings since the short respite last summer. Deflation threat could force the Bank of Japan to do additional easing. Also watch Japanese manufacturing PMI, industrial production, household spending and unemployment data.
Friday, June 29
Europe: This is the second day of the EU Economic Summit, so main comments and releases will appear today. As for the economic data, the focus will be on German May retail sales and French May consumer spending change – both indicators are forecasted to show weaker growth than before. Euro zone’s CPI is seen unchanged this month at 2.4% y/y.
Britain: the BOE will deliver its Financial Stability Report and the Governor Mervyn King will comment on UK financial prospects. The release and King’s speech will be closely watched as the Bank for International Settlements (BIS) has recently warned that the European crisis could infect the UK and the global economy unless governments take urgent action to tackle their problems.
Canada: Canada’s economy is expected to add 0.2% in April m/m after gaining 0.1% on March. Advance indicators are mixed: retail sales were discouraging last month, while wholesale trade and housing managed to rise. Moreover, the 58K jobs gain in May was mostly due to the increase in full-time jobs, while aggregate hours worked were flat. Such dynamics may be a warning signal as GDP equals hours worked times labor productivity.
US: the University of Michigan will release revised consumer sentiment and inflation expectations data. The outlook of US consumers could see a slight upward revision in June with from the preliminary estimate of 74.1 to 74.3 but remain at 6-month minimum. Also watch US personal spending, personal income and core PCE price index figures as well as Chicago PMI.
Have a profitable trading day with FBS!
If you have any questions to our analysts, you're welcome to ask or comments for this article!
Key options expiring today
Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (2 p.m. GMT).
Here are the key options expiring today:
EUR/USD: $1.2450, $1.2500, $1.2525, $1.2675;
USD/JPY: 79.25, 79.50, 80.00, 80.50;
GBP/USD: 1.5600, 1.5650;
AUD/USD: $0.9975, $1.0000, $1.0050, $1.0200;
USD/CHF: 0.9650.
Tuesday, June 26: economy and currencies
The beginning of this week is full of events on the forex front. Below you will find the most important FX news released on Monday and Tuesday that influence today's trade.
• Moody’s downgrades 28 Spanish banks. According to the rating agency, it becomes more difficult for the country to support its lenders on the back of the Spanish government's fragile financial position. The announcement came on the same day when Spain officially asked the EU for bailout. The uncertainty is likely to push the borrowing costs up.
• Cyprus announced it will apply for the EU funds right after Spain formally requested support. The country is likely to become the fifth euro zone member to ask for help: it needs to raise at least 1.8 billion euro by the end of the week to recapitalize Cyprus Popular Bank. On Monday Fitch Ratings lowered the nation's credit rating to junk level of BB+.
• Graeme Wheeler was named RBNZ’s next governor. He is to assume office in September, succeeding Alan Bollard, who served in the position for a decade. Analysts at Westpac expect RBNZ to increase rates from a record-low 2.5% in March 2013, when the new governor will settle in. This year the New Zealand dollar is the best-performing G10 currency.
• The market expects China to cut rates in August in attempt to combat the economic downturn.
• Japan's lower house has voted to approve doubling the country's consumption tax to 10% over three years. According to Prime Minister Yoshihiko Noda, the tax hike is needed to cut the budget deficit. However, the decision was not unanimous: opponents believe the hike is premature and will weaken the economy further. Japan’s corporate services price index, a leading indicator of consumer inflation, increased by 0.1% in May vs. 0.3% growth forecasted.
• German consumer climate index in June unexpectedly increased to 5.8.
Events to watch today:
• Euro area: Italy will offer inflation-linked securities maturing in 2016 and 2026 and 3 billion euro ($3.8 billion) of zero-coupon bonds. Spain will sell 3- and 6-month bills.
• Britain: Public sector net borrowing in May is forecasted to rise to 13.1B after a 18.8B decline in April. Later in the day the inflation report hearings will take place.
• US: S&P house price index is expected to decline by 2.4% y/y in April (the contraction will be less than in March). CB consumer confidence index in June is to decline to 64.0 vs. 64.9 in May on the back of the deteriorating labor market conditions.
The market players seem very unsure ahead of Italian and Spanish auctions and the EU summit. The single currency edged a bit higher, but faces resistance at yesterday’s maximum of $1.2560. Bulls and bears fight on USD/JPY intraday chart. Aussie, kiwi and loonie followed euro getting slightly higher on the back of the improved risk sentiment.
Commerzbank: comments on EUR/USD
Technical analysts at Commerzbank expect the single currency to consolidate versus the greenback in the near term. In the longer run, however, the outlook for EUR/USD remains bearish.
The specialists underline that euro failed to make a sustainable break above $1.2746, 38.2% Fibonacci retracement of the entire move seen this year, so its short uptrend is over.
According to the bank, EUR/USD will slide below $1.2435 (June 8 minimum) to $1.2288 (June 1minimum). Commerzbank says that resistance for the pair lies at $1.2583/1.2610 (June 22 and 13 maximums) and $1.2746.
Chart. Daily EUR/USD
Westpac: trading USD/JPY this week
Japan will release CPI report on Thursday. According to consensus forecast, the nation’s core CPI may have risen by only 0.1% y/y in May or even stayed flat compared with the 0.2% y/y increase in April. Tokyo core CPI has been posting negative readings since the short respite last summer.
Analysts at Westpac claim that if core CPI comes in stronger than expected, the Bank of Japan will leave policy unchanged. In this case it would be wise to sell USD/JPY. However, if consumer prices are lower than expected, one should do quite the opposite thing as the possibility of more easing from the BOJ will increase and yen will get under bearish pressure.
Since the specialists think that the second outcome is more likely, they recommend buying the greenback on the upside breakout at 80.50 stopping at 79.70 and targeting 83.00. According to Westpac, “80.50-80.60 area is the top of a trend line, and if we break, it will break big.”
Chart. Daily USD/JPY
USD/CAD: technical comments
The USD/CAD pair trades sideways for a third consecutive day consolidating between 1.0250 and 1.0300. Today the greenback's trading on the downside.
This week the Canadian dollar will depend on the news from euro zone and on the overall market sentiment, which are expected to be negative. In a short term analysts at BMO Capital forecast the cross to go up and to trade in a range of C$1.0250-C$1.0400. It makes sense to sell the Canadian dollar at current levels, targeting at C$1.0400 and with a stop at C$1.0200.
On the other hand, the US modest recovery and the stable domestic situation may push the Canadian dollar up. On Friday GDP and raw materials price index releases may support the CAD – the forecasts are rather positive. If the pair breaks below the C$1.0240 support, a further decline to C$1.0200 and C$1.0160 will become likely.
Support:
1.0240 (June 22 minimum);
1.0200 (38.2% Fibonacci retracement from a May rally);
1.0160 (June 20 minimum);
1.0123 (50% Fibonacci retracement);
1.0100 (psychological level).
Resistance:
1.0292 (23.6% Fibonacci retracement);
1.0320 (June 25 maximum);
1.0382 (June 6 maximum);
1.0400 (psychological level);
1.0440/45 (June1, 4 maximum).
Chart. H4 USD/CAD
MIG Bank: trading EUR/JPY
Currency analysts at MIG Bank note that EUR/JPY tried to recover from 95.56 (June 1 minimum).
The specialists say that the individual outlook for the USD/JPY and EUR/USD shows that the prospects for EUR/JPY are negative. If the pair breaks below 98.54, then the levels around 100.95 will be regarded as lower maximums.
According to the bank, it will be possible to say that the major minimum has been formed only if euro rises above 102.13 (May 22 maximum). In such case the single currency will get chance to rise to 104.62 (100-day MA) retracing decline from 111.43 (March 21 maximum).
The bank proposed the following trading strategy: place sell limit at 100.05 targeting 99.05/95.50/90.00 and stopping at 101.05.
Chart. Daily EUR/JPY
June 27: economy and currencies
The market’s in the uncertainty stalemate ahead of EU summit on June 28-29. Investors seem very cautious and are reluctant to make any wagers.
Commodity currencies are trading on the downside. Yesterday GBP/USD managed to rise above Friday’s maximums to print daily highs at $1.5650, but failed to sustain gains above and now trades below it. Despite the political issues in Japan yen will be likely driven by the global risk sentiment these days. EUR/JPY is staying close to the opening price of 99.30 after hitting yesterday 2-week minimum at 98.74 yen. USD/JPY edged a bit higher after 2 days of declines staying in the 79.55 area, above support at 78.60. Equities in Asia managed to hold their ground: Japan’s Nikkei Stock, Australia’s S&P/ASX 200 and South Korea’s Kospi rose by 0.46%, 0.74% and 0.06% respectively.
As for EUR/USD, it’s just below magnetic $1.2500 level. Yields on Spanish and Italian bonds rose at short-term debt auctions on Tuesday, reflecting investors’ doubts about the ability of the EU leaders to come up with any breakthrough agreements on a forthcoming summit. The market needs rapid actions, but even if some key decisions will be made on a summit, their implementation takes time. European Council President Herman Van Rompuy on Tuesday released a report on a closer fiscal and banking union, planning a euro zone treasury that would issue common debt in the medium term. Meanwhile, the German Chancellor, Angela Merkel, told German law makers yesterday that there would be no shared liability for debt "in her lifetime". With regard to Merkel’s inflexibility, Egan Jones, the small UK-based rating agency, downgraded Germany from AA- to A+ with negative outlook. Greece also should be kept in mind: Greek center of Planning and Economic Research (KEPE) expects the national economy to contract by 9.14% in Q3.
As a result, some analysts claim that what we see today may be calm before the storm, so be prepared and don’t say we didn’t warn you.
Events to watch today:
Germany: Preliminary CPI in June is forecasted to remain unchanged after a 0.2% decline in May.
US: A bunch of positive US data is expected to be released. Core durable goods orders, leading indicator of production, are expected to go up in May by 1.0% m/m compared with a 0.9% decline in April, what will be a positive sign for the economy. Durable goods orders (including transportation items) may increase by 0.5% after a remaining flat in the previous month. Pending home sales in May are to increase by 1.3% m/m vs. a 5.5% drop in April. However, the confidence in the stability of the US housing market is still weak.
Japan: Retail sales in May are likely to increase by 3.1% y/y after a 5.7% growth in April.
Have a profitable trading day with FBS!
If you have any questions to our analysts, you're welcome to ask or comments for this article!